EarlyBirdCapital

💰 The Fee Machine

SPAC underwriting fees follow a unique 5.5% structure: 2% paid at IPO, 3.5% deferred until merger completion. For EarlyBirdCapital, that meant an estimated $300M in total fees from SPAC activity.

The deferred fee structure was designed to align bank and investor interests — banks would only get their full fee if a deal closed. But in practice, this created perverse incentives: banks pushed marginal deals to close rather than walk away from deferred fees.

When the SPAC market collapsed, several banks including EarlyBirdCapital walked away from billions in deferred fees — but kept everything they'd earned upfront.